But the breakneck speed of Chinese urbanization led to an unsustainable boom in infrastructure, and the mounting debt that funded these projects is the first of four destructive forces now jeopardizing the country’s economic stability.
The post-COVID collapse of China’s housing market, for example, is leaving numerous large complexes unfinished or vacant, bankrupting or destroying the life savings of many homeowners and investors. Local governments are shouldering a substantial portion of the debt — $12.8 trillion in 2022, equivalent to 76 percent of China’s annual economic output — and they possess only a small fraction of the cash reserves needed to cover immediate debt obligations — 20 percent, according to the Rhodium Group.
China is likely facing deflation again as October’s consumer prices dropped, with a continuous decline in producer prices for over a year. This persistent price weakness suggests a faltering economic recovery and may prompt the central bank to cut reserve requirements to bolster the economy. Despite government efforts to stimulate trade and imports, economic indicators point towards a deepening downturn.
https://ca.finance.yahoo.com/news/china-fight-against-deflation-may-200000161.html